Walmart’s CFO explains why consumers rely on the company for their grocery needs.
Walmart is doubling down on its grocery business as more consumers turn to the company for their grocery needs amid lingering inflation.
The nation’s largest retailer reported last quarter that U.S. same-store sales rose 5.3% as it continues to gain market share in the grocery and general merchandise categories.
As the world’s largest retailer appeals to even more cost-conscious consumers, it is also revamping produce sections of its stores and expanding its food offerings, Walmart CFO John David Rainey told FOX Business.
“We have a very high quality product offering for people and that invites them in,” Rainey said. “It’s a much broader range than what we’ve had historically.”
In November, total food costs increased by 2.7% according to the consumer price index. The share of fresh vegetables grew even more to 2.9%.
Walmart’s modernized grocery department. (Walmart)
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The company is building new modernized stores and remodeling hundreds of others. Over the past three years, it has remodeled an average of around 700 stores each year, and plans to remodel even more in the coming year. The company’s new and updated stores include improved layouts, greater product selection, refreshed signage, color and shopping carts.
In addition to improved aesthetics, Rainey saw his private label as another driver. Walmart sees the rise of private labels as a larger share of total sales, driven in part by consumers’ focus on price during high inflation. Earlier this year, the company launched its newest and most expansive private label brand, Bettergoods, which spans 300 items including frozen, dairy, snacks, beverages, pasta, soups, coffee and chocolate.
Walmart has been building new, modernized stores and remodeling hundreds of others. (Christopher Dilts/Bloomberg via Getty Images/Getty Images)
Not only does the company offer a greater variety of food under private label, but the quality of the food has also improved, Rainey said.
“It’s a lot broader and attracts a lot more customers and members,” Rainey said, adding that “the quality is just a lot different than what you’ve seen historically.”
He also pointed out that consumers’ increasing reliance on convenience benefits Walmart. According to Rainey, one-third of their customers pay extra for expedited food delivery through Walmart’s delivery services.
Walmart shares are up over 70% in the past year, far outpacing the S&P 500’s 20%+ gain.
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This comes as a $25 billion merger Albertsons and Kroger fell apart amid concerns from federal regulators that the deal would undermine competition in the grocery store. The deal would be the largest merger in grocery history.
| Ticker | Safety | Last | Change | Change % |
|---|---|---|---|---|
| ACI | ALBERTSONS COMPANIES | 19.80 | +0.14 |
+0.71% |
| KR | KROGER CO. | 61.46 | -0.48 |
-0.77% |
But U.S. District Judge Adrienne Nelson said the plan put forth by the two companies to cut grocery prices and lay off more than 500 stores did not address concerns about reduced competition in the sector and the impact it could have on consumers and workers.
Albertsons, which subsequently sued Kroger for not working hard enough to secure the merger, argued the deal would expand competition, lower prices, raise associate wages, protect union jobs and improve the shopping experience for customers.
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As of September, Albertsons Companies operated 2,267 food and drug retail stores with 1,726 pharmacies, 405 affiliated fuel centers, 22 dedicated distribution centers and 19 manufacturing facilities.
Meanwhile, Kroger operates 2,750 retail grocery stores under various names, including Kroger, Ralphs, Dillons, Smith’s, King Soopers and Fred Meyer.
In the US, Walmart operates just over 4,600 stores. This does not include its membership warehouse, Sam’s Club, which has about 600 locations nationwide.
